BlackRock launches global quality factor ETF

Dec 15th, 2024 | By | Category: Equities

BlackRock has launched the iShares MSCI Global Quality Factor ETF (AQLT US), a new single-factor ETF designed to provide exposure to high-quality stocks globally.

BlackRock launches global quality factor ETF

BlackRock’s latest single-factor ETF targets high-quality stocks globally.

The fund is listed on the Cboe BZX Exchange with an expense ratio of 0.20%.

Single-factor ETFs allow investors to focus on specific investment factors that have historically been associated with long-term outperformance.

By targeting a single factor, such as quality, investors can potentially enhance returns and align their portfolios with individual risk preferences, investment timelines, and market outlooks.

Quality-focused strategies, in particular, aim to reduce risk by emphasizing financially stable companies with robust fundamentals.

Methodology

The ETF tracks the MSCI ACWI Quality Net Index, which selects stocks from the broad MSCI ACWI universe, encompassing large- and mid-cap equities across both developed and emerging markets.

The index methodology identifies stocks with strong quality characteristics based on three financial metrics: Return on Equity (a measure of profitability relative to shareholder equity), Debt-to-Equity (a gauge of financial leverage), and Earnings Variability (a measure of the consistency of earnings over time).

From this screened universe, the top 500 stocks are selected based on their quality scores. Constituents are weighted by a combination of their float-adjusted market capitalizations and quality scores, with a single issuer cap of 5% to ensure diversification.

The index undergoes a full review and rebalancing semi-annually.

As of the end of November, the largest sector exposures were Information Technology (32.6%), Health Care (16.1%), Communication Services (12.2%), Industrials (11.1%), Consumer Staples (10.1%), and Financials (9.4%).

Notable positions included Apple (5.3%), Microsoft (5.0%), Meta Platforms (4.9%), Nvidia (4.7%), Taiwan Semiconductor (3.0%), and Visa (2.8%).

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